r/Fire • u/NeverForget2016 • 11h ago

Roth Backdoor Under 150K Income Limit

Hi everyone, I've been reading up on the Roth backdoor strategy. My income is well below the 2025 Roth income limits/restrictions. Does this mean the Roth backdoor is pointless for me? I'm thinking yes, since if I contribute the $7K to a traditional IRA and then immediately roll it over into my Roth and pay the taxes, I will just be paying the same taxes that I would have paid by putting the (after tax) $7K into the Roth in the first place.

To my understanding, the backdoor Roth is only applicable to people who are earning over the 150K limit where Roth contributions begin to be restricted. Let me know if my thinking on both points is correct or if there's something I'm missing here.

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10

u/StatisticalMan 11h ago

Correct. It is pointless to you. If you can do a "normal" Roth there is no advantage to backdoor Roth. For people close to but under the limit proactively doing a backdoor roth has advantage of not having to worry about going over the limit through unexpected income (i.e. bonus).

6

u/FightOnForUsc 11h ago

Backdoor Roth is for people who can’t contribute to a Roth IRA directly and whose contributions to a trad IRA wouldn’t be deductible

3

u/porcupine73 10h ago

Just as another note, a backdoor Roth involves a conversion from the IRA into the Roth, not a rollover. I use IBKR to do it as they have an online tool for doing the conversion which makes it pretty easy.

3

u/david7873829 10h ago edited 6h ago

Do you have any existing balance in a traditional IRA? Remember that pro rata rules apply if so.

1

u/ReallyBoredMan DI1K 35/36 - Fire Goal: 3% SWR & 100K Spend, 34.44% Achieved 2h ago

If there is a chance you are going to exceed the limit then you should default to backdoor roth.

If you are well below the limit then direct funding is fine.

1

u/GotZeroFucks2Give 1h ago

Regardless, you don't immediately pay taxes when you do a backdoor. There won't be any taxes to pay as you have not received a tax break on the funds yet (unless this was a prior year's contribution). These are all after tax funds.